By and large, 2013 can best be described as a year of economic recovery, when the economy nearly overcame the toxic effects of the 2011 crisis. First of all, inflation which in November 2011 had reached 29% and is largely blamed for much of the economic downturn that followed, reached 3.5% mid year, only rose mildly to 6.8% as of November 2013.
As a result, the Central Bank Rate which opened the year at 12%, remained at manageable levels, touching the 11% mark, its lowest level ever, in June 2013, before rising to 12% again in September 2013, but again went down, to close December 2013 at 11.5%. Average lending rates took cue, registering a declining 9 basis points from 24.2% in January 2013 to 22.2% in October 2013.
Total commercial bank lending however did not jump by as much, it grew mildly, by 0.08 percent, reaching Ushs 8 trillion as of October 2013, from Ushs 7.4 trillion in October 2012. The industry’s Non Performing loans, also remained high, at 4.36% of all the total loans, an estimated Ushs 400 billion. However, with Net Interest Margins remaining high at 11.8% the banks are still expected to post another good 2013. As a result of a rebounding economy, we saw an appreciation of the shilling, by 5%, from an average of Ushs 2,677 to the dollar in January 2013, closing the year at an average of Ushs 2530.
This is much better than in 2012 when it depreciated by 11% from an average of Ushs 2,406 in January 2012 closing December 2012 at 2,668.Even though the business confidence index according to Bank of Uganda went down to 59 percent compared to 64.5% at the start of the year, there is optimism about 2014. For starters, government projections for FY2013/2014, predict a growth of 6% and industry experts we spoke to, largely agree with these predictions although they also admit there are more gaps that need to be addressed so as to unlock the speed of growth.
At Alpha Capital Partners, an indigenous Ugandan firm focusing on sovereign asset management, providing forex solutions to institutions, investors and markets advisory, the managing Director Stephen Kaboyo when asked for his comment on the economic performance of the last year and his projection for 2014 said, “Looking back at 2012/13, Uganda’s economic growth was largely driven by public investments especially in energy sector as well as modest growth in exports. The contribution of household consumption has been minimal
